Spotlight on Performance and Managing Underperformance

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In the current environment of economic uncertainty companies can’t afford to tolerate poor or under-performance from employees. We are seeing more and more evidence of this, with many employers proactively managing performance, or dismissing for poor performance, at a level which appears to be increasing. We’re also seeing significant “push back” from employees who have been dismissed for poor performance, with some making claims at the Employment Tribunal for unfair dismissal, amongst other claims, and many more taking a hard line in their approach to “out of court” settlement negotiations. So, at a point when it’s more important than ever for companies to let employees go if, despite opportunity and support, they have not been able to meet the employer’s standards, it’s becoming more difficult, expensive and time-consuming to do this.

In any organisation, the management of employee performance is a critical aspect that directly contributes to the overall success of the business. While recognising and rewarding exemplary performance is essential, it is equally important for employers to address and manage poor performance. This proactive approach ensures a healthy and productive work environment, promotes employee development, and safeguards the company's long-term success.

Why is managing poor performance important?

1. Maintaining a Productive Work Environment:

One of the primary reasons for managing poor performance is to maintain a productive and efficient work environment. Unaddressed performance issues can lead to a decline in overall team morale and motivation. When employees observe that poor performance is tolerated, it may negatively impact their own commitment to excellence, causing a ripple effect throughout the organisation. Managing poor performance sends a clear message that the company values high standards and expects all team members to contribute to the best of their abilities.

2. Fostering Employee Development:

Effective performance management is a key tool for fostering employee development. Addressing poor performance provides an opportunity for constructive feedback, goal setting, and skill enhancement. Rather than viewing it solely as a punitive measure, employers can approach poor performance as a chance to identify areas for improvement and provide targeted support. Offering training, mentorship, or additional resources can empower employees to overcome challenges, ultimately contributing to their professional growth.

3. Preserving Team Dynamics:

A cohesive and collaborative team is crucial for achieving organisational goals. Poor performance left unattended can disrupt team dynamics, leading to interpersonal conflicts and a breakdown in communication. By managing poor performance promptly, employers can prevent the negative impact on team cohesion. If employers include, as standard, a probation period of three or six months in employees’ contracts of employment, this creates a great opportunity for both parties to assess their suitability for the role. The probationary period allows any performance issues to be “nipped in the bud” before they worsen and, if necessary, allows the employer to part company with the employer with reduced legal risk.

4. Protecting the Company's Reputation:

A company's reputation is closely tied to the performance of its employees. Consistent poor performance can reflect poorly on the organisation as a whole, both internally and externally. Clients, customers, and stakeholders (including potential new recruits) may question the company's ability to deliver quality products or services. Managing poor performance demonstrates a commitment to excellence, which can help preserve the company's reputation and maintain the trust of all stakeholders.

5. Legal and Compliance Considerations:

Addressing poor performance is not only about organisational health but also about legal and compliance considerations. In the UK, employers are required to follow fair and transparent procedures when dealing with performance issues, which involves identifying the areas of poor performance, agreeing an improvement plan with the employee and the timescale for improvement and supporting the employee to meet the requirements of the plan. Ideally, at the end of the period the employee will have demonstrated that they can meet the company’s standards and maintain them. If not, and after due consideration as to whether there is any other appropriate role within the organisation that the employee is more suited to, the employer can then follow a dismissal procedure to terminate the employee’s employment.

With a few exceptions, failing to follow a fair procedure, will result in the employer being exposed to unfair dismissal claims at the Employment Tribunal, which are likely to be stressful, time-consuming and expensive to defend, as well as creating a distraction from the employer’s business and potentially damaging its reputation. Even when the employer follows a fair procedure before proceeding, an employee can make an Employment Tribunal claim but the employer will be well placed to defend it.

There are various other legal risks, the most significant being discrimination claims. The former employee could claim that their dismissal is due to a “protected characteristic” and therefore discriminatory. There are nine protected characteristics – gender, marriage and civil partnership, disability, age, religious or philosophical belief, race, pregnancy and maternity, sexual orientation and gender reassignment. If the employee has a protected characteristic, or claims that they do, they can make a discrimination claim at the Employment Tribunal, the argument being that their dismissal was connected to the protected characteristic and therefore discriminatory. For example, a female employee who is dismissed for poor performance because she has not made her targets due to the fact that the employer had failed to adjust the targets to discount the period she had spent on maternity leave, would have a good claim for discrimination on the basis of maternity, and gender. An employee with a mental health condition could make a claim on the basis that their performance was poor because of their health and therefore the dismissal was an act of disability discrimination. This type of scenario is becoming more and more common and can be difficult to manage.

While, for the most part, unfair dismissal claims can be made only where the employee has two or more years of service, an employee can make a discrimination claim without any minimum length of service. It is therefore recommended that employers follow a fair performance management procedure even for employees with short service, unless there is a good reason not to

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How to manage performance

In order to help employees fulfil their potential and, at the same time, reduce legal risk, there are a number of measures employers can take:

1. Establish Clear Expectations:

Clearly define job roles, responsibilities, and performance expectations from the outset. This includes setting specific, measurable, achievable, relevant, and time-bound (SMART) goals for each employee. Providing a roadmap helps employees understand what is expected of them.

2. Regular Feedback:

Implement a regular feedback mechanism. Schedule regular check-ins or performance reviews to discuss progress, achievements, and areas for improvement. This ongoing dialogue ensures that employees are aware of their performance and provides an opportunity for them to seek clarification or guidance.

3. Encourage Self-Assessment:

Encourage employees to reflect on their own performance. This can be done through self-assessment tools or discussions during performance reviews. When employees take an active role in assessing their performance, they are more likely to take ownership of their development.

4. Recognise and Reward Improvement:

Acknowledge and celebrate improvements in performance. Positive reinforcement can be a powerful motivator. Recognising efforts and achievements, even small ones, reinforces the importance of continuous improvement and boosts morale.

5. Provide Supportive Resources:

Ensure that employees have the tools, resources, and support they need to perform their jobs effectively. Addressing any barriers or challenges they may face demonstrates a commitment to their success and can contribute to improved performance.

6. Document Performance:

Keep detailed records of employee performance, both positive and negative. This documentation serves as a valuable reference during performance discussions and can be crucial if more formal interventions, such as improvement plans or disciplinary actions, become necessary. Comprehensive documentation will also be required in order to help employers defend Employment Tribunal claims.

7. Constructive Feedback:

When providing feedback on poor performance, focus on specific behaviours (giving recent examples) or outcomes rather than making it personal. Be constructive and offer guidance on how improvements can be made. Framing feedback in a positive and supportive manner encourages employees to see it as an opportunity for growth rather than a criticism.

8. Be Consistent and Fair and Avoid Unlawful Discrimination:

Apply performance management consistently across all employees. Treat each individual fairly and impartially. Consistency in addressing performance issues helps build trust and credibility within the team. It also helps to reduce legal risk. It’s important to take time to consider whether the employee’s poor performance could be due to a protected characteristic (e.g. disability), as mentioned above. If this is the case, the employer should adapt the performance management procedure to take account of the situation, or where appropriate, pause or dispense with it. So, for example, if an employee discloses that they have a health condition amounting to a disability that has caused their poor performance, then the performance improvement plan could be lengthened and/or the objectives adapted to take account of the disability.

9. Implement a Performance Improvement Plan and Set Clear Consequences:

Clearly communicate the consequences of continued poor performance, whether it's additional training or a performance improvement plan. Any performance improvement plan would have to involve setting out clearly the areas in which the employee has to improve, giving a reasonable timescale for improvement, offering support to help the employee improve and regular meetings to check the employee’s progress against the plan objectives. If the employee improves, the employer should set out clearly, in writing, that the improvement must be sustained. If there is inadequate improvement, and having considered whether there are any alternatives (e.g. demotion), the employer can move to a dismissal procedure. If the employee is dismissed, the employer should serve notice in writing and offer them the right to appeal the dismissal. Save for a short handover, for obvious reasons, it is generally better to pay the employee in lieu of notice than have them work out their notice. If there’s a reasonable risk that the employee is going to make a claim against the employer, consideration should be given to offering the employee a settlement agreement (a legally binding agreement under which the employee waives their right to make employment claims against the employer in return for compensation).

By incorporating these practical tips into your performance management approach, you can create a culture of continuous improvement, support employee development, and address poor performance in a constructive and effective manner. And, if you do end up taking the decision to dismiss for poor performance, you will be well-placed to defend any claim or negotiate an “out of court” settlement.

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